“The Lighthouse in Economics,” Ronald Coase’s renowned 1974 essay in the Journal of Law and Economics
Until that time, conventional wisdom from John Stuart Mill to Paul Samuelson had claimed that the lighthouse was the quintessential “public good,” which allegedly had to be provided by government due to the inherent free-riding of those who could not be charged for the services being provided. Coase showed, however, that in Britain, “contrary to the belief of many economists, a lighthouse service can be provided by private enterprise... The lighthouses were built, operated, financed and owned by private individuals, who could sell a lighthouse or dispose of it by bequest. The role of the government was limited to the establishment and enforcement of property rights in the lighthouse.” Only later did the British government consolidate all lighthouse services under its own monopoly in order to eliminate competition and directly reap the financial benefits developed by private entrepreneurs.
In addition to exposing the fallacies of a favorite public-goods rationalization, Coase’s essay rescued the lighthouse as a symbol of courage, enlightenment and independence.
source: the Independent InstituteAdditional Readings:
The Lighthouse as a Private-Sector Collective Good
Was Coase Right About Lighthouses?
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